Carmageddon for Tesla

This is where Hype Goes to Die.

Today was the monthly moment of truth for automakers in the US. They reported the number of new vehicles that their dealers delivered to their customers and that the automakers delivered directly to large fleet customers. These are unit sales, not dollar sales, and they’re religiously followed by the industry.

Total sales in November rose 1.3% from a year ago to 1,397,856 new vehicles, according to Autodata, which tracks these sales as they’re reported by the automakers. Sales of cars dropped 8.2%. Sales of trucks – which include SUVs, crossovers, pickups, and vans – rose 6.6%. Strong replacement demand from the hurricane-affected areas in Texas papered over weaknesses elsewhere. As always, there were winners and losers.

And one of the losers was Tesla.

First things first: There is nothing wrong with a tiny automaker trying to design, make, and sell cool but expensive cars that a few thousand Americans might buy every month, and trying to do so on a battleground dominated by giants. Porsche has been doing that for years. Porsche AG is owned by Volkswagen AG, which is itself majority-owned by Porsche Automobil Holding SE. Tesla is out there by itself.

And Tesla has put electric vehicles on the map. That was a huge feat. EVs have been around since the 1800s, but given the challenges that batteries posed, they simply didn’t catch on until Tesla made EVs cool. Yet Tesla has to buy the battery cells from battery makers, such as Panasonic.

Tesla isn’t quite out there by itself, though. The Wall Street hype machine backs it up, dousing it with billions of dollars on a regular basis to burn through as fast as it can. This masterful hype has created a giant market capitalization of about $52 billion, more than most automakers, including Ford ($50 billion). It’s not far behind GM ($61 billion).

But Tesla – which lost $619 million in Q3 – delivered only 3,590 vehicles in November in the US, down 18% from a year ago.

There are all kinds of interesting aspects about this.

One: 3,590 vehicles amounts to a market share of only 0.26%, of the 1,393,010 new cars and trucks sold in the US in November. Porsche outsold Tesla by 55% (5,555 new vehicles).

Two: Tesla doesn’t report monthly deliveries. It wants to play with the big boys, but it doesn’t want people to know on a monthly basis just how crummy and by comparison inconsequential its US sales numbers are. Opaque and dedicated to hype, it refuses to disclose how many vehicles it delivered that month in the US. So the industry is estimating Tesla’s monthly US sales.

Tesla discloses unit sales data in its quarterly earnings reports, long after everyone has already forgotten about the months in which they occurred.

Three: So how are Model 3 sales doing? Since Tesla doesn’t disclose its monthly deliveries in the US, the industry is guessing. The assembly line still isn’t working. “Manufacturing bottlenecks,” as Tesla calls it, and “manufacturing hell,” as Elon Musk calls it, rule the day.

Four: This is where hype goes to die. In February 2017, Tesla hyped these Model 3 production numbers for 2017:

Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018.

November is solidly in the fourth quarter. 5,000 vehicles per week would mean over 20,000 a month. OK, this is November and not December, so maybe 4,000 a week for a total of 16,000. We got 345.

Even if the estimate of 345 is off by 100 units up or down, it doesn’t even matter. And December isn’t looking much better. Because there is still no mass-produced Model 3.

Five: The bestselling Model S isn’t best-selling anymore.Inside EVs estimates that Tesla delivered 1,335 Model S in the US. This was far outpaced by the humble Model-3-killer the Chevy Bolt. GM sold 2,987 Bolts in November. Tesla is also estimated to have delivered 1,875 Model X SUVs in the US. It took the Model S and the Model X combined to beat the humble Bolt.

Six: The unglamorous Model-3-killer is number one. The Chevy Bolt faces no “production bottlenecks” and no “manufacturing hell.” It was rolled out gradually, starting in October 2016 in California and Oregon, with other states being added to the distribution plan over time. By August 2017, the Bolt was available in all states. By September, 2,632 Bolts were sold in the US; in October 2,781; and in November 2,987.

The Bolt became the best-selling EV in October and retained that crown in November. Nothing was even close. November was the ninth month in a row of rising sales, as it should be for a brand-new vehicle line. GM has sold 20,070 Bolts so far this year.

Seven: But the Bolt is just a flyspeck for GM. It’s something to build the foundation for a larger shift to EVs. It represented just 1.2% of GM’s total deliveries in the US in November. EVs are still just a niche product. And yet, even this flyspeck crushed every Tesla model without fanfare.

Every automaker is preparing a lineup of EVs. Unlike Tesla, they have their supply chains down pat, and they know how to get their assembly lines to function, and they know how to mass-produce vehicles. There are already about two dozen EV models on the market in the US. Like GM, these automakers are just using their EVs to lay the groundwork for the broader shift.

Tesla has used two years of hype surrounding the Model 3 as a way to boost its share price. This allows it to raise many more billions by selling more ludicrously overpriced shares to gullible investors, and by selling more debt to institutional investors who believe that Tesla’s ability to sell still more ludicrously overpriced shares to gullible retail investors will in effect guarantee the junk-rated debt they just bought. Few companies have ever been able to perform that scheme at this masterful level.

The new tax bill becomes effective January 01, 2018 if it passes. Everyone and their mother are waiting to sell after New Years for cheaper taxes. The institutions are waiting to sell after New Years after they publish their year end report. Institutions are also buying to play catch up window dressing. Short Tesla, or better yet, buy one year out of the money January 2019 puts on Tesla on December 31, 2017 or in the first few days of January if new pension money can drive the stock market any higher before the selling avalanche hits. You can take this to the bank and deposit it. LOL

Everything slowing down since Trump got elected. Credit having stalled in Q1/Q2 is grinding to a halt again, not just busienss loans but also autos. Has to be negative for corp margins next year, a slow growing, weak final demand economy being propped up by lowish interest rates as the Fed hikes to 2.5%

My only quesiton on Tesla is when do they use their main asset, their paper, to buy Chrysler and tell the world its their platform to conquer. Ie squeezing two lemons together like in the good old dot com era.

I’m not sure what exactly the chart shows that you linked. The title says “Other Consumer Loans: Automobile Loans, All Commercial Banks.” But it doesn’t show total auto loans. It shows something else, maybe a sub-sector of auto loans. The overall measure is “Motor Vehicle Loans Owned and Securitized, Outstanding.” They reflect total auto loans, and they’re up nearly 5% year-over-year in Q3 (at $1.11 trillion):

Economic growth in Q2 and Q3 was around 3% annualized, which is pretty good. Q1 was crummy. Consumer credit is rising sharply. Commercial credit measured by “C&I loans” has stalled. But bond issuance is soaring. And leveraged loan issuance is strong too. So in terms of overall credit, it’s mixed.

Concerning Tesla buying FCA – that would be a hoot to watch because it would instantly convert perception of what Tesla is. For now, the market thinks Tesla is some kind of miraculous Silicon Valley tech company with unlimited potential. Once it owns FCA, everyone may finally figure out that Tesla is just an automaker, and should be valued like one :-]

Enrique

Dec 2, 2017 at 1:31 pm

Just one hombre’s opinion here, but trading anything like this on any level is just an exercise in roulette wheel spinning.

That more or less includes all the “big” hype names, including actual non-Ponzi scheme companies (AAPL, etc)

Too many unknown unknowns, as we used to say back in the day. No way to properly systematize a coherent strategy.

CrazyCooter

Dec 2, 2017 at 10:14 pm

You know, when I first wanted to learn about investing – way back in ’08 after I trusted someone else and got my @** handed to me – I started reading.

Not math, strategies, and all that – but more history and systems and mechanics – just bland banking/finance stuff – how the fed works, how the monetary system works, how bonds work, concepts, etc.

If anyone out there has read Jessie Livermore’s autobiography – they will understand we have computers/software/etc, but nothing fundamental has changed. The system is full of actors of ill repute, who have big bank rolls, and selfish intentions.

There will be a top – but I am not really sure who is reasonably qualified to call it +/- 10% or +/- 20%. And that can kill just about anyone (before the leverage gets applied).

Good luck and stay out of trouble!

Regards,

Cooter

JZ

Dec 3, 2017 at 12:42 pm

Cooter, you do NOT want to play? That is NOT fine. They will force you to play a game you do NOT want. You will either lose 3% (official) slowly and rent squeezed to death through inflation OR you will play and get cut in half at any moment.
I took the slow motion of death like you are but I am in delusion that I am out of trouble.

All I can see is late cycle slowdown in real economy and bubble in financial and gobalised economy.

However if they can keep the economy going with low rates and wages grow faster than GDP then you could have a few years with mediocre headline numbers but where ordinary people do ok.

chris Hauser

Dec 3, 2017 at 5:09 pm

the arithmetic don’t work.

all ways.

but there might be fun pair trade.

Joan of Arc

Dec 1, 2017 at 7:56 pm

As long as Musk has a mouth and an audible the stock goes up. Omaha! Omaha!

FS

Dec 1, 2017 at 7:23 pm

After 3 years researching on Tesla, I just started my synthetic short on it. I got time up to January 2020 for the short to unfold. But I guess the profit will ripe sooner. The ridiculous electric truck was the last shot. It does not work with the fundamental rules in physics unless someone can invent a battery that can hold energy with the same density as fossil fuels. Nope. there is none.

truth always

Dec 1, 2017 at 10:12 pm

Would you please describe some steps on how to do synthetic shorts?

I am trying to short TSLA myself but would help if you can give some pointers.

I am novice,

Joan of Arc

Dec 1, 2017 at 11:48 pm

Yes, I would be glad to. Synthetic = derivative = put. First, scoot half way around the board and pick up a free “get out of jail card”. Then continue further around the board until you land on Broadway with all the houses and a hotel…now reach deep into your pocket and pull out a whole lot of money to pay the rent. If you can’t, then your going to jail, directly to jail…and don’t pass go.

Marty

Dec 2, 2017 at 8:03 am

“Synthetic Short: A trading options strategy that is used to replicate a short stock position pay-off. It is carried out by buying a specific amount of “at the money” put (long put) and selling the same amount of “at the money” calls (short call) of the same underlying stock with the same expiration date. In synthetic short stock, the potential profit and the risk is unlimited.”

If you are a novice, DO NOT DO THIS. If you must make the bet, decide how much you’re willing to lose, then buy some long dated, out of the money puts and forget about them. You will likely lose all your bet, but only what you bet.

bob the financial engineer

Dec 2, 2017 at 12:00 pm

with a synthetic short your potential gain is limited to the strike price * the number of shares in your option position plus or minus the net proceeds from your short call and long put cost which will vary depending on where the underlying price was in relation to your strike price, If the stock price goes to zero.

your potential loss is unlimited, theoretically. actually your broker will close out your short call position when you lose so much you no longer have the margin to cover your short call.

this is not a limited risk option position, this is a synthetic forward position, similar but not exactly like a futures position. most wall streaters don’t even have the knowledge of these type of derivatives, LOL.

of course you also don’t have to have the same strike price on your call and put positions, enabling all sorts of profit/loss possibilities. you don’t have to be ”at the money”and you can also do time spreads as well. but you won’t read about those possibilities in finance textbooks and very few wall streaters are smart enough to understand the advantages of these alternate positions

there is also a simpler position which i won’t name because i don’t want people making a huge loss and blaming me, LOL

Wolf The Smart

Dec 4, 2017 at 8:07 pm

Synthetic short is a great way to trade TSLA here. There is no way this can stay above $250 for a long period of time. There are lot of new EVs coming from all the great car companies.

So you sell long dated Calls, use the proceed to buy long dated Puts. Basically you get the Puts for free. As the stock goes lower, you will get a huge gain for free. Many fold gain if the stock trades below $20 by 2019. It should.

This is a no brainer.

Kraig

Dec 5, 2017 at 2:16 pm

I believe aluminium air batteries have the same energy density as diesel.

electronhauler

Dec 6, 2017 at 2:07 pm

The energy density does not need to be the same.. The diesel motor, transmission and fuel tanks go away and make loads of room for a battery. The problem is the cost of the battery, which makes all EV’s high capital cost, but low operating cost compared to fossil vehicles. There are a few Model S taxis in service that have proved that.

Keef, et al, has the NHTSA issued any safety recalls for these shjtboxes yet?

DK

Dec 1, 2017 at 7:44 pm

I smell a rat. Or maybe musk. Or both? The. New Tesla SUV the Musk Rat?

R2D2

Dec 1, 2017 at 11:04 pm

Both? I thought Musk was a rat dressed up as Iron Man?

I smell only one rat :).

intosh

Dec 3, 2017 at 4:09 am

You mean the new ratster… euh, I’m mean new roadster? Anyone with half a brain knows these new products (roadster and truck) are smoke and mirrors to distract the gullible from the real story: Model 3. There is no way Musk is so stupid as to put serious resources into terribly niche products while he does not have enough resources and expertise to deal with the fire consuming his business right now: the manufacturing of the Model 3. But the media (understandable because Tesla attracts clicks) and gadget geeks were all gaga over those product “reveals”.

They absolutely must get the Model 3 right before churning them out. In this case the short-term month-to-month scrutiny of deliveries is best ignored.

But the slump in Model S #’s needs to be taken VERY seriously! They need to roll out some enticing upgrades or price incentves before Christmas! ( – and they will.)

Nick Kelly

Dec 2, 2017 at 9:25 am

True, but impossible with a robotic production line which doesn’t exist for something like a car.
The Bolt is built the same way all cars are by humans with some components manufactured by robots, like welding the body panels, but installation of wipers, glass, seats etc. done by humans with power assists.

Let’s be clear which hype has died here: it’s not the concept of a relatively affordable small electric car. The Bolt and Nissan Leaf are alive. It’s the failure of the so- called robot factory, causing Musk to resort to individual assembly. because he doesn’t have a proper human- operated production line.

The extravagant hype and promises made for robotics and AI is going to claim more victims than just the Model 3.

Guido

Dec 1, 2017 at 7:59 pm

Musk has moved onto his next Hollywood production. He’s going to make a big hole in Chicago (taxpayers’ wallets). Or may be he’ll talk of growing corn on Jupiter. Whatever will titillate the reporter who’s supposed to hype him up after the 10 course meal and wine and sundries.

This was why the words ‘legerdemain’ and ‘shill’ were entered into the English lexicon.

Joan of Arc

Dec 1, 2017 at 8:12 pm

I don’t think he can eat a 10 course meal, not even a 2 course meal. Did you read the article? He has assembly line problems as well as tunnel vision under the ground in California. He looks pale and thin lately, stooped over, 10 years older, perhaps little appetite for food.

Guido

Dec 1, 2017 at 11:59 pm

I was referring to the reporter who really needs to work hard to avoid becoming corpulent on Musk’s dime (from those 10 course meals and “sundries”, to put it politely). Why will a reporter push a point of view anyway? The reporter is almost always either a paid hack or brainwashed zealot or both (mostly just a shill).

Paulo

Dec 1, 2017 at 8:08 pm

As a Canadian, it kind of reminds me of DeLorean.

I drive a very old Toyota PU, but from the outside looking in, my brother’s (and sister’s) Prius looks pretty good compared to a Tesla.

High speed rail, Mag-Lev, self-driving taxis, flying cars, NASA to Mars, MAGA…….Shale growth and energy independence, Tax Reform for the middle class (cough cough), just how long has pot been legalized down there, anyway?

JB

Dec 1, 2017 at 9:36 pm

The tesla ev will become a collectible . Jay Leno has one in his museum. Maybe a back to the future remake will portray it as a time travel machine .

BreAvo

Dec 1, 2017 at 9:53 pm

Never underestimate a loyal following. It’ll interesting to see how many folks plunked down a qtr-mil-$’s to wait almost 3 years for a roadster.

The main stream sloshes slowly, but ends up following the hard-carved path. Electric motors are simply superior. Batteries are improving. Petrol is not.

JB

Dec 1, 2017 at 10:41 pm

I really hope those Tesla EV enthusiasts receive their product . But many have their deposits at risk .

You must be joking with those batteries. It’s just a PURE distraction from real problems around this company!

Les Francis

Dec 1, 2017 at 11:16 pm

You mean the Barnum and Bailey batteries that will provide reserve power for all of 18 minutes.
The South Australian government swallowed the muskrats hype hook line and sinker and no matter what the power engineers thought about it the government forked out the taxpayers sheckels.
Of note. The parts of the City of Adelaide have been blacked out twice in the last week.

Tesla don’t make the batteries – Panasonic or another maker do – usually in China.

Bin

Dec 1, 2017 at 9:20 pm

I’ve wanted to short this for some time, but too scared. Anyway thought this article was relevant.

If a stock goes from 50 to 100 you make 100% or double your money.
If a stock goes from 100 to 50 you make 50% or half of your money.
This is why it never pays to short.

alex

Dec 2, 2017 at 2:01 am

use puts. You can make x10.

Coaster Noster

Dec 2, 2017 at 2:11 am

Say you have $20K to invest. You put it in your brokerage account, and then proceed to short 1000 shares at $60 a share. Now your account shows $80k, but the brokerage wants you to keep all that $80k in your account. No problemo, if you bought $20k of stock, the shares would probably sit in the same way, in the account.
The shorted stock loses 50% of its value. Now it is at $30 per share. You buy back 1000 shares. You are now sitting on “all cash”. And the total is $50k. Much better than a 100% increase to $40. And that is with only a 50% drop in share value. Many stocks fall much further (e.g. US Steel, June 1, 2008, $184.75….January 1, 2016, $7.00).

Joan of Arc

Dec 2, 2017 at 2:25 am

Like alex said above your comment, buy puts, you have a defined risk of loss, and you can make a thousand times on your money. Shorting sucks compared to buying puts.

davep

Dec 2, 2017 at 11:01 am

Selling puts is a far more profitable business and of course is usually done by the commercial brokers. Only suckers play against the house.

Thor's Hammer

Dec 2, 2017 at 4:49 am

Amazon has hardly shown a strong profit since the days when it was a book peddler. How did that short go for you? Still want to short the Muskrat Momentum Machine? Shorting stocks is a fools game, especially when there are puts and calls available.

My primary profit stream comes from selling calls into expiration. I typically cover them in less than 10 hrs with a maximum stop loss held to 10% balanced by a frequent profit of 30%. Institutional investors love to lock in their profits even if it costs a premium so they can start their Friday golf game early, so I’m willing to collect that premium. And that is the free tip for Christmas!

Raging Ranter

Dec 3, 2017 at 1:38 am

Irrelevant. If the stock goes down, you ain’t making anything if you’re long.

gorbachov

Dec 1, 2017 at 10:25 pm

Tesla reminds me of Dyson.He sells cleaning tools for 5 times the price

of everyone else.Musk not Nasa invented a reusable rocket.He

made ev.s cool.Remember G.M. blew it the first time around with ev’s.

Now with trucks and who knows what else he’ll be OK.

Felix__47

Dec 2, 2017 at 12:53 am

I wonder why he doesnt just lower the model S price. He has already spent the development costs. The problems have been worked out. There is an existing assembly line. The model 3 was supposed to be a cheaper model but per unit it looks like it will cost more. Porsche sold the same car for 50 years.

Coaster Noster

Dec 2, 2017 at 2:17 am

Why lower the price of the Model S ? There is no “unsold inventory” at the current price.

I believe it’s a six-month wait for the S right now.

The idea is to sell cars to make money, not simply to sell cars.

Joan of Arc

Dec 2, 2017 at 2:48 am

Is that why he bores tunnels under Los Angeles? To make money? Before the company makes its first penny in profits, it will have to raise another $100 billion over the next 10 years. Half of that will go into boring machines under Los Angeles. When the San Andreas fault moves, triggering the Big One, 1/2 of LA could collapse into the tunnels causing multi trillion dollars in damages.

MC01

Dec 2, 2017 at 3:11 am

It’s a shame Herrenknecht is a private company because they seem to be doing pretty damn well, at least judging by the beehive of activity their factory in Schwanau is.
Everybody’s boring tunnels like there is no tomorrow and they are reaping the big fat profits.

Ponzi schemes are everywhere these days. As long theres fools around, it will keep going.

kevin

Dec 2, 2017 at 10:34 am

Tesla may or may not survive, but the important thing to understand is that even if Tesla fails, some other company (Uber/BYD/Ford/Toyota/Google etc.) may still buy out Musk, his patents etc. and continue to push the EV technology to market…..eventually.

The current shareholders will either get burned to ashes or they get a one-way ticket on his rocket to Mars. lol.

Personally, I think Musk is over-stretching himself and totally losing focus. I mean he fancy himself as an Ironman runnign lots of HUGE untested new tech (he DID actually appear cameo in one of the Ironman movies).

Like build spaceships to Mars, tunnel underground with his Hyperloop, worry for humanity on an AI apocalypse, and still has spare time to run a car company all at the same time??
Does the Marvel Superhero with a mission to save the world ever sleep? lol.

If you want to bet real money, bet on EVs tech, maybe the next company taking over will succeed. Remember, that the very first mouse was not made by Apple, but Apple made it commercially successful.
Same goes for spreadsheet programs, Lotus came first, then Microsoft basically kicked the butt of Lotus.
Same goes for Macdonalds, Ray Kroc was not the first to market fast-food burgers…he took over someone else’s business and built an empire on others innovations.
Same goes for web browsers, Netscape came first before IE, Chrome or others.
You get the picture….

All the claims of having first-mover advantage is often over-rated.
Seasoned entrepreneurs know first-mover often is the one who bears the huge cost and effort of initial R&D, mistakes in the market approach and flame-outs, then the next best competitor comes in and picks up the pieces, learns all the tricks of the trade (without the cost and time) and goes meteoric in success and market dominance.

I’ll bet all the other car companies are closely watching Tesla like vultures now, learning how he succeeds and also his mis-steps.

If I ever want to bet real money on EVs, I’d rather bet on the NEXT car company that buys over Musk shares and his engineering team.

Nick Kelly

Dec 2, 2017 at 12:52 pm

Musk has said anyone can use his patents which is not a big deal because he doesn’t hold any needed to build electric cars.
There is probably not a more totally known tech than the electric motor in all its variations.
The lithium- ion battery has been around since Panasonic introduced it over 20 years and still supplies it to Tesla or anyone else.

The big insight that led to the Model S, was available to anyone who has every ridden an electric bus: unlike a diesel bus that labors away from a stop, they accelerate like …..a sports car!
Massive low speed torque without a transmission is a characteristic of the electric motor.
To someone whose definition of a sports car is acceleration, it’s the grail.

Good for Musk for realizing this. Too bad he didn’t stick to it.

kevin

Dec 2, 2017 at 11:26 pm

@Nick Kelly, yes, patents now are a dime a dozen. It just forms part of the supports for the knowledge base of a company.
The real insights and skills are with the designers/engineers and the operational management & marketing teams of each company.

I referred to their “patents” as catch-all term for their accumulated experience and know-how.
There are now too many intangible bits of technical know-how and things are moving too fast for everything to be codified into IP. Besides, I know IP (I have a patent to my name too) and the meaningful ones are too technical for most to grasp…and they expire.

The key assets of such a company pushing the technological frontiers is their core design/engineering team as I’ve mentioned, not necessarily the “paper assets”.

And yes, acceleration-per-unit-kg-in-weight is way better than most petroleum drive trains. However, do note that most sportscar enthusiast or buyers-of-premium wants to show-off, and Tesla is a relatively quiet car.

There is no loud Vroom-vroom engine roar that these customers crave too. Musk could easily handle that though, just install some external speakers to play a fake engine roar even though its totally spurious and unnecessary. lol.

Personally, I only like engine roar only if I’m the one driving; otherwise I think its a nuisance to the neighborhood peace and quiet. lol. On the whole, I still think quiet cars with less noise and other environmental pollution, will and should be the future.

Gibbon1

Dec 3, 2017 at 3:06 am

Elsewhere I’ve mentioned three scenario’s

1. Tesla is bought by an established automotive co.
2. Tesla buys out an established automotive co
3. Tesla becomes an aggressive medium ev company.

At this point Tesla isn’t going to up and fold like a lot of people seem to be hoping for.

Scenario #1 happen all the damn time. Imagine Toyota wanting to add the Tesla badge to it’s current line up. Toyota Tesla/Lexus.

Scenario #2 also happens. AOL Time Warner anyone?

Scenario #3: Means Musk pulls it off and manages to glean a steady profit stream off the Model 3, Model S etc.

One thing that argues against #1-2 is. Tesla has a brand. And they seem to manage without a dealer network. Two things a standard manufacture would bring to the table.

And currently Tesla has a pile of money.

kevin

Dec 3, 2017 at 10:06 am

@Gibbon1, yes, a variety of scenarios are up in the air now, and what pans out eventually is obviously known only on hindsight.

I was surprised that the technical arguments for & against EVs can be almost as heated as a political discussion. IMHO, I think the technological ramp with Moore’s law favors Tesla, but just too many things can go wrong with new technological adoption.

Just like the argument for AC versus DC currents back in the days of Edison and Nikola Tesla. Sometimes a clearly better technology may still lose out in the markets, due to politicization of purely technical issues, massive egos involved and plain old vested interest of existing market stakeholders.
(e.g. imagine worldwide how many ICE mechanics will lose their jobs/businesses if EVs with their electric drive trains that can only be serviced in the Gigafactory becomes the norm, or the oil majors who revenues will clearly be hit).

Another very good recent case study would be the confluence of Uber ride-sharing applications with self-driving technologies. The tech is clearly good for consumers but often becomes politicized by existing taxi drivers and taxi companies, existing institutions of car insurance businesses, even traffic policemen may lose jobs etc., and local politicians who don’t understand a dime about tech but knows how to whip up voters anger etc. Businessmen who’s revenues are affected will certainly pay financial analyst to “talk down” the technology. That’s also the same reason why smoking nicotine was still a great business despite all the scientific evidence against it. Many companies were DELIBERATELY giving false technical information through mis-information campaigns and what-nots.

Of course, some big egos like Kalanick’s doesn’t help either. CEOs like Kalanick and Elon Musk sees the exciting vision and thus they are very eager to push ahead, but market forces WILL push back, and all these are often NON-TECHNICAL in nature. Most often they are financially-motivated to say the least.

I sincerely HOPE Elon Musk makes it with Tesla and brings EVs to broad market adoption and later brings humanity to Mars too lol; but as the saying goes…”hope is a poor investment strategy”.
I have not place any real money for nor against Tesla. I just pray for the good man, who at least has a broader purpose in service of humanity.
(factoid: Elon Musk was already very rich man from his paypal payout, BEFORE he even started Tesla…he could have easily retired on his Malibu beach sipping his colada for the rest of his life, but instead he had to go work on difficult problems and face all the huge challenges and still be called a fraud by some ;-)

Sometimes, I really wonder if humanity is worth saving in the first place.

Kraig

Dec 5, 2017 at 2:26 pm

Do you know who owns the patent for the ac motors in the teams. These really are revolutionary. Large powerful three phase ac no rare earths needed so no issue with scaling. If its tesla should be churning them out and selling to chevy,nissan,ford,Renault. I suspect if it is not tesla they have some sort if exclusive dewl. I want to be long in whoever owns those patents.

BreAvo

Dec 2, 2017 at 1:41 pm

Good points. How it plays out is hard to determine. However:
a) EV-tech has now REALLY arrived (its been here before) and is now here to stay.
b) Tesla is now a known and valuable brand. Its design and tech are stunning. It’s already bigger than Elon. His baby has grown up (but still benefits from his guidance).

RichieRich

Dec 5, 2017 at 12:08 am

EXACTLY. This is what will happen. I’m 100% confident about it. Who will the second wave leader actually be? Not so sure about that one.

Agnes

Dec 2, 2017 at 11:15 am

Anyone interested in battery development may want to google “IEEE John B. Goodenough”. JBG invented the lithium battery. He has something new and astonishing. IEEE is the Institute of Electrical and Electronic Engineers. They know their stuff and peer review. So far I see no flaw in the article.

Prairies

Dec 2, 2017 at 3:02 pm

John B. Goodenough, I wonder if he could play the guitar just like ringing a bell.

Agnes

Dec 2, 2017 at 6:03 pm

Well, yes, that’s how I remember his name. But that’s not him. Look him up.

Clay

Dec 3, 2017 at 5:23 am

LOL nice one. “Go Johnny, go, go!”

Nick Kelly

Dec 3, 2017 at 12:27 am

Normally, no one with a battery breakthrough (the Grail) would dream of disclosing it before applying for a patent. In fact doing do would invalidate the application.

It is conceivable, barely, that someone would be so publicly spirited as to forgo any hope of profit, however it would be difficult for the inventor to raise capital while so possessed.

Agnes

Dec 3, 2017 at 10:08 am

1) As you noticed, not much technical was given away in the article, except that experts in the field thought well of it and the designer.

2) You can give away lots of secrets if you leave out crucial details. Or, in the case of individuals, if follow through involves lots of work.

EVs are a fraud, but so is solar energy. The laws of physics have not been repealed by the axioms of financial engineering. That said Teslas electric semi is a game changer because the economy moves its cargo in much slower ways, ships, train, trucks. A truck that goes 35 and the driver never has to stop? That’s worth doing.

Prairies

Dec 2, 2017 at 2:54 pm

I wouldn’t go as far as to say the semi is a game changer yet. If the weight is as bad as the model 3 in comparison to it’s fuel consuming counter parts it will be hard pressed to even get on a highway legally.

I will stick with them being more of a fraud for now, they conveniently pushed this semi out in front of these production numbers to drum up more cash investors before people could see behind the curtain.

“Tesla should just cut to the chase and launch 3,000 lbs of cash into space…. you know, for their investors.”

Kaz Augustin

Dec 4, 2017 at 2:39 am

LOL!

JA

Dec 2, 2017 at 2:01 pm

Making a profit in the auto industry is difficult, especially for a start-up. The costs of development, component and manufacturing tooling are huge. Here are some rough guestimates.

Development costs for a start-up such as Tesla, Faraday Future, Lucid, and others, can easily exceed a $1 billion. Automobiles, unlike most tech, can and do kill people, so even though computer modeling has reduced costs, one must still build expensive prototypes and do real world testing.

Automotive component tooling costs are huge. There are hundreds of parts in a vehicle and most of these require tooling. For a completely new vehicle the component tooling costs can easily exceed $500 million.

A manufacturing line for a new vehicle also requires a lot of equipment and tooling. Existing manufacturers will try to repurpose existing lines to minimize this cost. For Tesla and other start-ups, they must build a new line which can easily exceed $300 million.

There is a trade off in component tooling costs with regards to variable costs. Tooling for 10,000 units/year versus 150,000 units/year will be very different in terms of sunk costs and variable costs. At 10k/year you pay less for the tooling but your piece part price may be over 5 times the cost as a high volume tooled part.

In addition to the above development and tooling costs, EV’s have higher variable costs due to the extensive use of aluminum. Steel components are currently much cheaper. EV’s need the light weight of aluminum in order to achieve a longer range.

My guess is a high end completely new EV tooled for 10k units/year might have component costs well over $60k per unit. If it’s a super high tech vehicle like Faraday Future’s vehicle, the variable costs could be closer to $150k each. Remember, you still need to amortize the $2 billion development and tooling costs into the projected lifetime volume of that vehicle. So now you can see some of the challenges an EV start up faces.

Nick Kelly

Dec 3, 2017 at 11:08 pm

If you are building a metal body your tool and die costs for body panels will be the same for 10K units or for 150K units.

This is just one of the reasons that volumes below 100 K are virtually impossible to justify.

Lots of start ups even by bigger outfits, don’t begin with their own engine, e.g., Subaru which began with a VW engine.

akiddy111

Dec 2, 2017 at 2:16 pm

I see Tesla selling more vehicles than Porsche within 3 years. Analysts are forecasting $20 billion in revenue for Tesla in 2018. Seems high but we’ll see.

Nick Kelly

Dec 3, 2017 at 11:25 pm

Which car? Porsche is the world’s most profitable car company per car.
Unlike Musk with his Model 3, it does not want to make a mass market car.

If Musk had stuck to his Model S and sold as many cars as Porsche, he might have survived.

To do that with a 35K car he would have to sell ten times as many cars as Porsche, because the profit is so much lower per unit.

Of course at his current rate of Model 3 production, he is losing money on every car.

I hope he does salvage something from the Model 3 disaster.

Ford Motor Co. was Ford’s third company, the first two having gone bankrupt when he was 40. Then he took on a real tough manager who made him focus.

Mike Ra

Dec 2, 2017 at 4:33 pm

A few number of insiders and Wall Street types have gotten filthy rich off of Musk. It’s all inside stuff and 90% theatre. And our stupid government regulators (what a joke) have no interest in shutting down the hype as it’s all a part of big picture to hype tech since it is our only hope for any kind of growth in this economy.
This is what all this crap boils down to.

They used to call them “snake oil salesmen”. Another good comparison is pro wrestling. All fake/acted out.

If you try and short this stock, once the insiders see enough shorts they’ll do a squeeze. Put options also are a huge gamble; albeit with limited loss.

Telsa will eventually correct. Probably when the overall market crashes. But this crap could go on for another year or two or even more.

What’s a mother to do?

Russell

Dec 5, 2017 at 1:20 pm

mike ra “A few number of insiders and Wall Street types have gotten filthy rich off of Musk.”

The public got rich off of Musk too. That’s if you bought TSLA early.
Sounds like you didn’t.

akiddy111

Dec 2, 2017 at 4:47 pm

Tesla has grown it’s revenue from zero to $10 billion in 8 years. That kind of growth exceeded Amazon’s.

Musk has delivered incredible shareholder value.

Tesla may very well exceed Porsche in unit sales in 2 to 3 years. That is phenomenal. Just a contrarian view. I hope no one objects too much.

Nick Kelly

Dec 4, 2017 at 12:06 am

No doubt at all that early guys into Tesla have done very well.
But investing for ‘value’ usually means something other than a stock price run up.
Value or ‘book’ is what is left if you can’t sell stock or borrow money. It’s what there is when the music stops.
In the current environment you don’t have to make a profit, you just have to sell stock.
A rising tide floats all boats, but the tide is going out as interest rates rise.
I hope Musk does make it, but if I owned Tesla stock I would cringe every time he announces a new project.

I think he should approach an outfit like Kia who know how to run a production line and see if they’ll take over the Model 3. The South Korean’s build for lots of people, GM’s Pontiac Wave etc. And I don’t think Kia has an electric but not sure.

People making fun of the giga- battery just installed in OZ, probably don’t understand electricity. When load exceeds supply, breakers start tripping off NOW,and this can cascade down the line.
A fifteen minute buffer is huge, to give the system time to react.

That is the kind of new thing Musk should be FOCUSING on.

QQQBall

Dec 2, 2017 at 6:08 pm

Fiskar made beautiful cars

LouisDeLaSmart

Dec 2, 2017 at 6:32 pm

In my recent past I worked on 2 ramp projects. When semiconductor industry pushes a new technology we are talking about a paradigm shift with new concepts, machines, layers and never before used materials. So what is so problematic about building an electric car?
///
In my humble experience there is a possibility … It seems that they have struck upon a “Golden Path” = a set of specific tools/operation steps that for no understandable reason provides a variable yield of … I presume power supply systems (I am not calling it battery because it’s more then a battery). The paradox of the Golden path is that is the only thing working. If you touch it you lose your production…maybe forever. There are many approaches to go around this problem…irrelevant. If this is the case, It’s then just a matter of time before they break that barrier…and come upon the next big problem…which if they don’t hurry up could be investors running for higher ground.
///

Coal is about 30% of total electricity production in the US. In California, there are no more coal power plants. And besides, people buy electric cars because they LIKE electric cars (electric motors are superior in many ways to the ICE… the battery is the only hangup, and the battery problems are rapidly getting solved.)

Gibbon1

Dec 3, 2017 at 3:23 am

Friend of mine has Chevy Bolt that is drives from Berkeley to Mountain View.

Thing works. He likes driving it.

The era of objections based on hand waving is over.

Another friend of mine has been buying up totaled ev’s for basically nothing and salvaging them/parting them out. Mutual friend mentioned most of the really messed up cars, still drive once you override the safeties. Compare with a ICV, pop a hose, hole in the radiator, all sorts of things and they’re dead.

and people in CA buy electricity from the grid which is produced by coal fired plants.
the battery is only the tank that holds the fuel, now if you had a electric motor that ran on gasoline you would have something.

Guido

Dec 3, 2017 at 12:17 pm

Let us hope the Musk may just figure out how to power the grid with just “hotair” one day.

Gibbon1

Dec 3, 2017 at 9:36 pm

On the other hand California’s utilities aren’t renewing contracts with out of state coal fired plants. That’s been the policy for ten years now.

Jeremy

Dec 2, 2017 at 7:43 pm

Friend of mine has a Bolt. Lovely car, all the bells and whistles, and comfortable seats. They lose money on each one they sell.

I think Tesla might be intentionally making Model 3 cars slowly because these cars are money losers. Maybe this would encourage the depositors to convert their purchase into a Model S or X because they don’t want to wait.

michael

Dec 2, 2017 at 10:27 pm

I think you just won the prize. If Tesla cannot make money on a $70000 car how can they make money on a $30000 car? Clue: They will sell as few as possible. Oh I am sorry our model 3 production is backlogged, I can give you a great deal on a model S.

Nick Kelly

Dec 4, 2017 at 12:30 pm

From 35 to 70? Now THAT would be a ‘bait and switch.’ and would
make most people very unhappy. Add to that: the people who want a 3, budget minded, green types, are a different crowd than the ‘Wow! look at me in my rare expensive sports car!’ types.

And no, he’s not intentionally making the 3 slowly. He thought they’d be coming off a robotic production line, like stamping out widgets.
Now that hasn’t worked and he doesn’t have a normal moving production line with humans like everyone else in the business.

And yes he loses money on each 3 sold, but he can’t solve that problem by selling fewer. He would just lose more money on each one.

He needs to kill the 3 (think how much that would save! Instead of infuriating 35 K buyers by suggesting they pay double) or get someone experienced in MASS production to take it over.

Pavel

Dec 3, 2017 at 7:22 am

Any respect or admiration I had for Musk evaporated when I started looking into his hair-brained hyperloop scheme. A fellow called Thunderf00t on Youtube has done a few exposés of this nonsense. (Google “Thunderf00t Hyperloop Busted”). There are clearly problems with the basic physics (how quaint) of establishing a vacuum over such long distances. Here is an example: https://www.youtube.com/watch?v=Z48pSwiDLIM

I think Musk is a like a magician, constantly diverting our attention from one failed venture by hyping the next.

Kaz Augustin

Dec 4, 2017 at 2:50 am

Hmmm, yes, Pavel. It occurs to me that if the Hyperloop could be done, the Japs would have done it by now, esp as it would reduce the one big objection to their High Speed Rail (HSR) network…the noise. How long have they had their HSR projects now? Since the 1950s? But I’m sure they’re nowhere as smart as Elon! ;)

nikola tesla was THE genuis. i am sorry elon is messing over tesla's name. they viciously screwed tesla in life and i really hope elon does not screw him post mortum.

it cost 30% more to insure a tesla. AAA hiked rates this summer because routine repairs costs are way above normal.

teslas are being hacked. the owners of teslas hack teslas systems and naferious people hack teslas.

when ignited, the lithium batteries create huge raging fires for 24 – 48 hours and the fire department has to wear hazmat gear to deal with lithium fires.

elon lies routinely.

solar city and space x get funding from tesla motors.

routine repairs take months on a tesla.

they say elon is a genius. i wonder why? the model 3 is way way behind schedule, has a multitude of serious issues and elon's response is "look over there at our shiny sparkling new giant truck and real fast shiny red car."

elon did not invent EV, is not nikola tesla, did not invent cars, did not invent lithium batteries, did not invent touch screens, space x is NASA's baby, the boring company will trigger huge quakes in california and he has not cut a profit. he has made zero money. zero.